Nov 2 (Reuters) – China has arrested two executives from a Hong Kong-owned fund for irregular futures trades involving hundreds of millions of dollars, said Xinhua news agency, the first public arrests linked to a non-mainland fund caught up in a crackdown on risky trading.

The Ministry of Public Security said the case was still under investigation and that its plans to enlist foreign authorities to net overseas suspects, the official news agency reported, citing a ministry statement on Sunday.

Chinese authorities have blamed “malicious” trading in stock futures for stoking share volatility that saw bourses slide over 40 percent since June. Investigations into market manipulation have so far netted journalists, senior executives in brokerages and even securities regulators.

The general manager of Jiangsu-based Yishidun, Gao Yan, and senior executive Liang Ze, were arrested for allegedly buying and selling futures in prices that deviated from market standards and illegally made more than 2 billion yuan ($ 316 million), said the news agency.

Yishidun could not be reached for comment. An official at China Fortune Futures declined to comment.

Yishidun, a company jointly invested by two Hong Kong-based firms set up by foreign nationals Georgy Zarya and Anton Murashov, was founded in 2012.

The firm allegedly used software to buy up to 31 futures contracts in one second, said Xinhua, adding from early June to early July it made a net profit of over 500 million yuan.

“The company’s trade activities deteriorated the fluctuations in daily trade prices.. And affected then market trade prices and normal trade orders,” said the statement, according to Xinhua.

In a separate probe, Xu Xiang, general manager of Shanghai-based company Zexi Investment, and others at the firm were under investigation for suspected insider trading, said Xinhua, citing a separate statement from the Ministry of Public Security.

Zexi Investment was not immediately available for comment.

The slide in stocks since June has prompted regulators to restrict automated trading in commodities futures and tighten other rules which have winded the futures market.

Chinese regulators have asked foreign and Chinese-owned brokerages in Hong Kong and Singapore to hand over stock trading records, while some local fund managers have been called in and asked to explain trading strategies every two weeks.

Hundreds of foreign hedge funds and traders are working in a regulatory grey area in China, finding legal ways to bet on Chinese stocks and derivatives without going through formal investment channels, which prevent them using strategies such as short-selling.

High frequency trading is not illegal in China but regulators have been moving against “coordinated stock dumping” as well as automated, algorithm-driven trading seen as aggravating market turbulence.

In August, China’s markets regulator froze a trading account linked to Citadel Securities, a unit of the U.S. group that also owns hedge fund Citadel LLC, for “spoofing”, a practice that involves placing and then cancelling orders, distorting prices.